Algeria: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Algeria

2023ARTICLE IV CONSULTATION—PRESS RELEASE;STAFF REPORT; AND STATEMENT BY THE EXECUTIVEDIRECTOR FORALGERIA Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussionswith members, usually every year. In the context of the2023Article IV consultation withAlgeria, the following documents have been released and are included in thispackage: •APress Releasesummarizing the views of the Executive Board as expressed during itsMarch 27,2024consideration of the staff report that concluded the Article IVconsultation withAlgeria. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onMarch 27,2024following discussions that ended onDecember 14,2023, with the officials ofAlgeriaon economic developments and policies. Based oninformation available at the time of these discussions, the staff report was completedonMarch 8, 2024. •AnInformational Annexprepared by the IMFstaff. •AStatement by the Executive DirectorforAlgeria. The document listed below hasbeenor will bereleased. Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes 2023 Article IV Consultation withAlgeria FOR IMMEDIATE RELEASE Washington, DC– March 29, 2024:The Executive Board of the International Monetary Fund (IMF)concluded the Article IV consultation1with Algeria on March 27, 2024. The Algerian economy was still emerging from the Covid pandemic when spillovers fromRussia’s war in Ukraine and recurrent droughts pushed up inflation, while high internationalhydrocarbon prices boosted government revenue and exports.The Algerian economy is estimatedto have grown by 4.2 percent in 2023, a robust performance owing to a rebound in hydrocarbonproduction and strong performance in the industry, construction, and service sectors. The externalposition remained solid with a current account surplus for the second year in a row. However, inflationpressures persisted (primarily due to high food prices) and monetary policy remained accommodative.The fiscal deficit is estimated to have widened, albeit less than foreseen in the 2023 revised budgetbecause of relatively slow execution rates. The near-term outlook is broadly positive, but inflation remains a concern.Real growth is forecastto remain strong in 2024, at 3.8 percent, supported in part by large fiscal spending. Inflation would startto decelerate, particularly thanks to easing fresh food prices, although entrenchment at a relativelyelevated level is a concern. The current account surplus is projected to narrow further in 2024 ashydrocarbon prices decline. Medium-term economic prospects hinge on efforts to diversify the economy and the ability toattract private investment, and are subject to several risks.Risks on the downside include stubborninflation, volatility in international hydrocarbon prices, fiscal risks from contingent liabilities, largebudgetary financial needs, and rising public debt. Extreme climate events would affect the economy andthe budget while a disorderly energy transition is a longer-term risk. On the upside, sustained, bold, anddeep structural reforms and resolute efforts to diversify the economy, improve the business climate,attract investment, and tap new export markets could spur growth and job creation further. Executive Board Assessment2 In concluding the Article IV consultation with Algeria, Executive Directors endorsed staff’s appraisal asfollows: Executive Directors agreed with the thrust of the staff appraisal. They welcomed Algeria’s sustained solidgrowth and external position, despite multiple economic headwinds. While the near-term outlook is broadly positive, inflation remains high and downside risks, including from volatile commodity prices andclimate hazards, require continued vigilance. In this context, Directors emphasized that a sound policymix, accompanied by sustained implementation of reforms to diversify the economy and reduce climaterelated risks, will be necessary to ensure macroeconomic stability and promote inclusive and sustainablegrowth. Directors welcomed the authorities’ commitment to medium-term fiscal sustainability. Noting theimportance of maintaining social equity, they indicated that the large projected near-term fiscal deficit andfinancing needs could increase financial, fiscal, and inflationary vulnerabilities. In this vein, theyencouraged the authorities to gradually rebalance fiscal policy to help preserve buffers and improve fiscaland debt sustainability, while ensuring targeted support for the most vulnerable. Directo